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Marathon Petroleum Plans More Investments in U.S. Crude Midstream, Retail

Marathon Petroleum Corp. (MPC) announced Wednesday it would invest more in its midstream and retail segments over the next three years to take advantage of growing North American crude oil markets.

"MPC's fourth quarter was a strong finish to a year in which we earned in excess of $2 billion," said CEO Gary Heminger. "Our 2013 earnings reflect our ability to consistently meet energy market needs through our logistical flexibility and relentless focus on top-tier operational performance."

According to Heminger, MPC's position strengthened in 2013 -- in part from its acquisition of the Galveston Bay refinery in Texas (see Shale Daily, May 3, 2013) -- as well as additional investments. "While refining will remain our largest source of earnings and cash flow, we will augment this through expanded investments in midstream and retail in the years ahead," he said.

The CEO said MPC would focus on growing its midstream and retail businesses through 2016. He said the company would spend about $4 billion on midstream and retail capital expenditures (capex) during that three-year time frame, compared with $1.7 billion over the previous three years.

Heminger added that MPC plans to make equity investments in Enbridge Energy Partners LP's Sandpiper and Southern Access Extension pipeline projects, thereby linking North American crude oil production with the Midwest refining region. "These infrastructure investments represent attractive potential additions to MPLX in the future.”

Last December, MPC CFO Don Templin said that through 2016, the company planned to invest $640 million in midstream assets, $2.4 billion in pipeline transportation -- including MPLX, and $925 million on growing its Speedway retail segment (see Shale Daily, Dec. 5, 2013).

The Findlay, OH-based operator earned $626 million ($2.07/share) in the fourth quarter, a 17.1% decrease year/year when it earned $755 million ($2.24). Adjusted earnings in the period were $633 million ($2.10/share), down 16.7% from the $760 million ($2.26) in 4Q2012.

Full-year earnings in 2013 were $2.11 billion ($6.64/share), down 37.7% from $3.39 billion ($9.89) earned in 2012. Adjusted full-year earnings also fell 35.2% between 2012 and 2013, from $3.35 billion ($9.79/share) to $2.17 billion ($6.84/share).

MPLX, a master limited partnership formed by MPC in 2012 to operate and acquire midstream assets, reported 4Q2013 income of $20.2 million (27 cents/unit). Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to MPLX were $28.9 million, while MPLX's distributable cash flow was $28.3 million.

"During MPLX's first full year as a publicly traded partnership, we demonstrated our ability to add value to unitholders," Heminger said. "Consistent with our objective of maintaining an attractive distribution growth profile over an extended period of time, we have increased our distribution every quarter since our IPO [initial public offering]."

Heminger said MPLX also strengthened its position in 2013. "The increase in North American crude oil production makes a top-tier energy logistics company such as ours an increasingly important source of value for investors, and we have continued positioning ourselves to leverage our assets and midstream expertise," he said.

"In addition to completing our first acquisition of assets from our sponsor, MPC, we also initiated work on the Cornerstone Pipeline in southeast Ohio, an organic project that will leverage growing Utica Shale liquids production and provide growth to MPLX's distributable cash flow.”

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